Insight: Smartphones are pushing Service Innovation in Bank industry

Smartphones have enriched user exeprience combining high innovative hardware and software (touchscreen and user interfaces). However, that's not been enough. Smartphones have also added services as a new component, bringing service inside (geared by application and content ecosystems).
According to Gartner, Smartphone sales have grown 27% in the last Q2 while mobile phones have declined 6%; see Figure 1. In the smartphone's OS battle market share, Symbian (51%) and Microsoft (9%) have dropped year-by-year and RIM and Apple have grown. However, Android is slowly growing with only 2%.

Figure 1: Table with Smartphone sales Q2'09 from Gartner.

This trend is pushing manufacturers to improve devices and focus on services as vital component. Also, operators will request lower prices because consumers want a cheaper service: "... the price of wireless service is far more important that the network or the phone." (NYT)

This scenario is bringing new opportunities to explore in several industries. Smartphones are pushing Service Innovation; see Figure 2. This the case where technology pushes business.

Figure 2: Smartphones are pushing service innovation

In the last post, we analyzed how banks could innovate offering services more than products in the downturn, looking forward the upturn.
Banks should take advantage of this smartphone's scenario bringing browser-based or application-based services (Apple's iPhone application store, Google's Android application store, other). Potential market is enormous given that mobile banking adoption has not exceeded 10% in Europe and 5% in USA in 2008 (Forrester).
Banks should change consumer needs since more than 40% of people don't see value in using mobile banking (Forrester). Therefore, Banks should incite consumers to use other services more than check a balance, for example, offering contactless mobile payments: "With the new generation of mobile devices, the smartphone, BlackBerry, iPhone, gPhone, technology fillers are driving mobile payments. Once contactless chips are installed in most phones, this model will grow rapidly" (Accenture) see Figure 3.

Figure 3: Contactless mobile payments

Customers behavior by accessing mobile banking is predominant at home: 31% of people access financial accounts at home, 25% while running errands, 15% while commuting, 11% at work, 9% on vacation, and 8% in business travel (InformationWeek).
Banks should consider the growing smartphone market and customers behavior to be prepared for the new age of social banking and the emerging models such as financial social networks, microfinance and personal finance management (Gartner).

Indeed, every new designed mobile service must take in account that customer trust is very important for banks (Gartner): "There is evidence that a lack of customer trust in banks may hurt larger banks more than smaller banks ... However, this is an industry issue that all institutions must address".

Banks taking this competitive advantages brought by smartphones will emerge strong in the upturn and will be positioned stronger in the next decade.